New Zealand bonds slump at close ahead of Q4 employment report, GDT price auction early next week

Friday, February 2, 2018 6:28 AM UTC

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New Zealand government bonds slumped at the time of closing Friday as investors wait to watch the country’s fourth-quarter employment report and the GlobalDairyTrade price auction, scheduled to be held early next week. Also, the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, also due mid-next week will add further direction to the debt market.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 3 basis points to 2.97 percent, the yield on 20-year climbed 4 basis points to 3.49 percent and the yield on short-term 2-year ended nearly flat at 1.94 percent.

"We expect the RBNZ to again leave the OCR at 1.75 percent at its Monetary Policy Statement next Thursday. The Bank has maintained a watchful stance for some months now. And while it sounded a slightly more upbeat tone in November, a broad spirit of cautiousness has underpinned its assessment for some time. We don’t see that changing next week," ANZ Research commented in its latest report.

Further, New Zealand’s number of dwelling consents fell 9.6 percent m/m (sa) in December, continuing the roller-coaster ride seen over recent months. Somewhat coincidently it follows a 9.6 percent m/m lift in November and 9.6 percent m/m fall in October. This volatility has been led entirely by the volatile multi-dwelling component, which is estimated to fall 21 percent m/m. Issuance for ‘houses’ fell 2.3 percent m/m, its fifth consecutive fall.

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